Last checked at 27 Sep 2011 11:10
Kryso Resources plc
'Kryso' or 'the Company'
AIM: KYS
Interim Results for the Six-Month Period Ended 30 June 2011
Operational Highlights
24 drill holes completed within Kryso's Pakrut licenced area in 2011 Five core drill rigs currently operating Mine construction will commence following receipt of mining licence and finalisation of mine financeFinancial Highlights
Development work expenditure up 72% to US$1,424,000 (1H2010: US$830,000). These costs have been fully capitalised. Cash at period end of $13.285m Administration Costs up 38% to US$937,000 (1H2010: US$677,000) due to increasing the size of the Company's operations and opening of an office in Beijing Loss down 38% to US$447,000 (1H2010: US$718,000)For further information please visit the Company's website (www.kryso.com) or contact:
Craig Brown/Anthony Schindler, Kryso Resources plc
Tel: +44 (0) 20 7349 9160
Jeremy Ellis/Romil Patel, Evolution Securities
Tel: +44 (0) 20 7071 4300
Christian Dennis/Jeremy King, Optiva Securities Limited (formerly Orbis Equity Partners Limited)
Tel: +44 (0) 20 3137 1902
Louise Mason/Bob Huxford, Walbrook PR
Tel: +44 (0) 20 7933 8780
Chairman's Statement
Operational Highlights
During the half year to June 2011, our Company has made further significant progress in exploration at the Pakrut licence area and has also laid the groundwork to commence mine construction at Pakrut. At the same time, we are awaiting approval from the Tajikistan Government, at a presidential level, for our mining licence; an upgrade from our current trial mining licence. The licence has taken longer than expected and so we have prudently informed our shareholders that production at our mine will likely be later than the previously stated target of end 2012.
The Pakrut Gold Project
Drilling Programme
A total of 24 drill holes have been completed within Kryso's Pakrut licence area so far this year, and five core drill rigs are currently operating. Six holes have been drilled at Pakrut, seven holes at Eastern Pakrut, five holes at Central Rufigar and six at Upper Rufigar. Currently four drill rigs are operating at Pakrut and one at Eastern Rufigar.
This is the first drilling carried out by Kryso at the Rufigar prospects, which are located approximately 6km north of Pakrut. Kryso has encountered four ore zones at Upper Rufigar, of which only one was discovered by previous Soviet trenching. The Company is very encouraged by internal assay results to date from drilling of Ore Zone 2 in Central Rufigar and results will be announced once the Company's internal results have been confirmed by an external laboratory. In addition to drilling, Kryso has completed 1,250m of bulldozer trenches across the projected Rufigar ore zones. The two new drill rigs that we purchased in the first half of the year are currently drilling the deeper levels of the Pakrut deposit where the grade is believed to be increasing at depth with the thickness of the ore body widening to the east.
With the addition of the new drill rigs, Kryso's drilling programme for 2011 at Pakrut is larger than in previous years. During 2011, so far 5,509m have been drilled and Kryso believes that the results of this drilling will, in due course, generate an increase in the total resources of the Pakrut gold project.
Mine Construction
The Beijing General Research Institute of Mining & Metallurgy ("BGRIMM") is in the process of finalising detailed designs for construction of the Pakrut mine and Kryso is ready to begin mobilising further equipment to site and upgrading the road to the project. In addition, the Company has issued a tender for the construction of the mine and received in response proposals from four large Chinese construction companies. We are now in the process of negotiating the terms of the bids with each of the four construction companies.
We have also appointed SRK Consulting China Ltd ("SRK") to carry out reviews and assessments of the ore body resource models; provide an updated JORC compliant resource estimate; simulate the mining models and convert qualified resources into JORC ore reserves; and complete a resource and reserve assessment to review and assess all other technical aspects of the project. We expect the results of the resource assessment and JORC ore reserve estimation to be available before the end of 2011.
New Mining Licence Application & Construction Update
In October 2010 LLC Pakrut, the Company's 100% owned Tajik subsidiary, applied for a mining licence for the Pakrut gold deposit. LLC Pakrut's current exploration and trial mining licence allows it to explore the Pakrut licence area and to mine at the rate of 300,000 tonnes per annum until April 2014. LLC Pakrut has applied for a licence that will allow it to mine up to a maximum rate of 660,000 tonnes per annum for 20 years. All environmental, geological, reserve and ministerial approvals for the application have been obtained and the application is currently awaiting final Tajik government approval at presidential level.
The Company had anticipated that construction would commence at Pakrut during the second half of 2011 and that production would begin by the end of 2012, however this timetable has been impacted by the fact that it is taking longer than expected to receive the Pakrut mining licence from the Tajik government. Issue of the mining licence is required before the finalisation of mine finance and commencement of construction can occur. As mine construction cannot be commenced during the winter months, it is unlikely that we will be able to commence construction before the spring of 2012.
Financial Results for the Half Year ended 31 June 2011
The amount spent by the Company on development work during the year increased by 72% to US1,424,000 (1H2010: $830,000). Administration expenditure increased by 38% to US$937,000 (1H2010; US$677,000) due to increasing the size of the Company's operations and opening of an office in Beijing. The overall loss incurred by the Company decreased by 38% from US$718,000 to US$447,000. Total cash equity funding raised from exercising warrants and options during the period was US$631,000.
Outlook
In spite of the delays to the mining licence approval, and the knock on effect to our construction schedule, the Directors of Kryso have been very encouraged by our drilling programme in the Pakrut and Rufigar areas. We believe that the results of the drilling, which are due before the end of the year, will result in an increase in the JORC compliant resource estimate of the Pakrut Gold Project.
Our largest shareholder, CNMIM, continues to be extremely supportive of our project and our PRC bankers, the Export-Import Bank of China ("China Exim Bank"), are continuing with their due diligence work on the Pakrut Project with a view to finalising the loan arrangements once we have confirmation of the full 20 year mining licence. Our preparation work for the mine has continued, including a construction tendering process and upgrading of the road leading to the mine. We remain very confident of the quality of the Pakrut asset and the eventual granting of the mining licence.
I would like to take this opportunity to thank all of our employees, management and advisors for their efforts during 2011 and also thank our shareholders for their continued support of our Company. We look forward to our Company's further progress in the second half of the year.
Tau Luo
Non-Executive Chairman
27 September 2011
KRYSO RESOURCES PLC CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 30 JUNE 2011
| KRYSO RESOURCES PLC | CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME | ||||||||
| FOR THE SIX MONTHS ENDED 30 JUNE 2011 | |||||||||
| Audited | |||||||||
| Unaudited | Unaudited | Year ended | |||||||
| Six months to | Six months to | 31-Dec | |||||||
| 30-Jun-11 | 30-Jun-10 | 2010 | |||||||
| Note | US$'000 | US$'000 | US$'000 | ||||||
| Group Revenue | - | - | - | ||||||
| Cost of sales | - | - | - | ||||||
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| Gross Profit | - | - | - | ||||||
| Administrative expenses | (937) | (677) | (935) | ||||||
| Profit/(Loss) on foreign exchange | 460 | (44) | (193) | ||||||
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| Operating Loss | (477) | (721) | (1,128) | ||||||
| Finance income | 30 | 3 | 11 | ||||||
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| Loss on Ordinary Activities before Taxation | 2 | (447) | (718) | (1,117) | |||||
| Tax on loss on ordinary activities - | - | - | - | ||||||
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| Loss on Ordinary Activities after Taxation | |||||||||
| attributable to equity holders of the Company | (447) | (718) | (1,117) | ||||||
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| Total Comprehensive Income attributable to equity | |||||||||
| holders of the Company | (447) | (718) | (1,117) | ||||||
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| Loss per Share (expressed in US dollars per share) | |||||||||
| attributable to equity holders of the Company | |||||||||
| - basic and diluted | 3 | -0.0018 | -0.0045 | -0.0065 | |||||
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All of the activities of the Group are classed as continuing.
| KRYSO RESOURCES PLC | CONSOLIDATED BALANCE SHEET | |||||||
| AS AT 30 JUNE 2011 | ||||||||
| Audited | ||||||||
| Unaudited | Unaudited | Year ended | ||||||
| Six months to | Six months to | 31-Dec | ||||||
| 30-Jun-11 | 30-Jun-10 | 2010 | ||||||
| US$'000 | US$'000 | US$'000 | ||||||
| Non-current Assets | ||||||||
| Intangible assets | 19,716 | 16,535 | 18,292 | |||||
| Tangible assets | 125 | 45 | 84 | |||||
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| 19,841 | 16,580 | 18,376 | ||||||
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| Current Assets | ||||||||
| Inventories | 1,577 | 774 | 722 | |||||
| Debtors | 1,335 | 105 | 81 | |||||
| Cash and cash equivalents | 13,285 | 1,675 | 16,591 | |||||
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| 16,197 | 2,554 | 17,394 | ||||||
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| Current Liabilities | ||||||||
| Trade and other payables | (322) | (349) | (239) | |||||
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| (322) | (349) | (239) | ||||||
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| Net Current Assets | 15,875 | 2,205 | 17,155 | |||||
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| Total Assets less Current Liabilities | 35,716 | 18,785 | 35,531 | |||||
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| Equity and Reserves attributable to Equity | ||||||||
| Holders of the Company | ||||||||
| Called-up equity share capital | 4,296 | 2,946 | 4,216 | |||||
| Share premium account | 34,933 | 19,276 | 34,381 | |||||
| Retained earnings | (3,513) | (3,437) | (3,066) | |||||
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| Total Equity | 35,716 | 18,785 | 35,531 | |||||
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| KRYSO RESOURCES PLC | CONSOLIDATED CASH FLOW STATEMENT | |||||||
| FOR THE SIX MONTHS ENDED 30 JUNE 2011 | ||||||||
| Unaudited | Unaudited | Audited | ||||||
| Six months to | Six months to | Year ended | ||||||
| 30-Jun-11 | 30-Jun-10 | 31-Dec 2010 | ||||||
| US$'000 | US$'000 | US$'000 | ||||||
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| Net Cash Outflow from Operating Activities | (2,500) | (1,004) | (1,443) | |||||
| Cash flows from Investing Activities | ||||||||
| Interest received | 30 | 3 | 11 | |||||
| Payments to acquire intangible fixed assets | (1,412) | (830) | (2,572) | |||||
| Payments to acquire tangible fixed assets | (56) | (39) | (95) | |||||
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| Net cash outflow from Investing Activities | (1,438) | (866) | (2,656) | |||||
| Cash flows from Financing Activities | ||||||||
| Issue of equity share capital (net of issue costs) | 632 | 1,719 | 18,864 | |||||
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| Net cash inflow from Financing Activities | 632 | 1,719 | 18,864 | |||||
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| Net (Decrease)/Increase in Cash and Cash Equivalents | (3,306) | (151) | 14,765 | |||||
| Cash and cash equivalents at beginning of period | 16,591 | 1,826 | 1,826 | |||||
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| Cash and cash equivalents at end of period | 13,285 | 1,675 | 16,591 | |||||
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| Reconciliation of Operating Loss to Net Cash | ||||||||
| Outflow from Operating Activities | ||||||||
| Operating loss | (477) | (721) | (1,128) | |||||
| Depreciation | 3 | 4 | 6 | |||||
| Increase in inventories | (855) | (256) | (204) | |||||
| (Increase)/decrease in debtors | (1,254) | 3 | 27 | |||||
| Increase/(decrease) in creditors | 83 | (34) | (144) | |||||
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| Net Cash Outflow from Operating Activities | (2,500) | (1,004) | (1,443) | |||||
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| KRYSO RESOURCES PLC | CONSOLIDATED STATEMENT OF CHANGES IN EQUITY | ||||
| FOR THE SIX MONTHS ENDED 30 JUNE 2011 | |||||
| Capital | Share | Retained | Total | ||
| premium | earnings | equity | |||
| US$'000 | US$'000 | US$'000 | US$'000 | ||
| Balance at 1 January 2010 | 2,725 | 17,778 | (2,719) | 17,784 | |
| Total comprehensive income | - | - | (718) | (718) | |
| New shares issued | 221 | 1,498 | - | 1,719 | |
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| Balance at 30 June 2010 | 2,946 | 19,276 | (3,437) | 18,785 | |
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| Total comprehensive income | - | - | (399) | (399) | |
| Share based payment | - | - | 770 | 770 | |
| New shares issued | 1,270 | 17,101 | - | 18,371 | |
| Cost of shares issued | - | (1,996) | - | (1,996) | |
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| Balance at 31 December 2010 | 4,216 | 34,381 | (3,066) | 35,531 | |
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| Total comprehensive income | - | - | (447) | (447) | |
| New shares issued | 80 | 552 | - | 632 | |
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| Balance at 30 June 2011 | 4,296 | 34,933 | (3,513) | 35,716 | |
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KRYSO RESOURCES PLC NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2011
1. Accounting Policies
Basis of Accounting
These unaudited interim financial statements were approved for issue by the Kryso Resources plc Board of Directors on 21 September 2011.
This financial information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) as adopted by the European Union and IFRIC Interpretations. The financial information has been prepared under the historical cost convention. The annual financial statements are prepared in accordance with IFRS as adopted by the European Union. The same accounting policies are followed in the interim financial information as applied in the Group's latest annual audited financial statements.
As permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing this interim financial information.
The Group has applied consistent accounting policies in preparing the consolidated interim financial statements for the six months ended 30 June 2011, the comparative information for the six months ended 30 June 2010, and the financial statements for the year ended 31 December 2010.
Standards, amendments and interpretations to existing standards effective in 2011 but not relevant to the Group
The following standards and amendments to existing standards have been published and are mandatory for the Group's accounting periods beginning on or after 1 January 2011 or earlier periods, but not currently relevant to the Group.
A revised version of IAS 24 "Related Party Disclosures" simplified the disclosure requirements for government-related entities and clarified the definition of a related party. This revision was effective for periods beginning on or after 1 January 2011.
An amendment to IFRS 1 "First-time Adoption of International Financial Reporting Standards" relieved first-time adopters of IFRSs from providing the additional disclosures introduced in March 2009 by "Improving Disclosures about Financial Instruments" (Amendments to IFRS 7). This amendment was effective for periods beginning on or after 1 July 2010.
Amendments to IFRS 7 "Financial Instruments: Disclosures" were designed to help users of financial statements evaluate the risk exposures relating to transfers of financial assets and the effect of those risks on an entity's financial position. These amendments were effective for periods beginning on or after 1 January 2011 but are still subject to EU endorsement.
Amendments to IAS 32 "Financial Instruments: Presentation" addressed the accounting for rights issues that are denominated in a currency other than the functional currency of the issuer. These amendments were effective for periods beginning on or after 1 February 2010.
IFRIC 19 "Extinguishing Financial Liabilities with Equity Instruments" clarified the treatment required when an entity renegotiates the terms of a financial liability with its creditor, and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. This interpretation was effective for periods beginning on or after 1 July 2010.
An amendment to IFRIC 14 "IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction", on prepayments of a minimum funding requirement, applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of contributions to cover those requirements. The amendment permitted such an entity to treat the benefit of such an early payment as an asset. This amendment was effective for periods beginning on or after 1 January 2011.
New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2011 and not early adopted
The Group's assessment of the impact of these new standards and interpretations is set out below.
IFRS 10 "Consolidated Financial Statements" builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group's Financial Statements.
IFRS 11 "Joint Arrangements" provides for a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement, rather than its legal form (as is currently the case). The standard addresses inconsistencies in the reporting of joint arrangements by requiring a single method to account for interests in jointly controlled entities. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group's Financial Statements.
IFRS 12 "Disclosure of Interests in Other Entities" is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group's Financial Statements.
IFRS 13 "Fair Value Measurement" improves consistency and reduces complexity by providing, for the first time, a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. It does not extend the use of fair value accounting, but provides guidance on how it should be applied where its use is already required or permitted by other standards. This standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group's Financial Statements.
IAS 27 "Separate Financial Statements" replaces the current version of IAS 27 "Consolidated and Separate Financial Statements" as a result of the issue of IFRS 10 (see above). This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group's Financial Statements.
IAS 28 "Investments in Associates and Joint Ventures" replaces the current version of IAS 28 "Investments in Associates" as a result of the issue of IFRS 11 (see above). This revised standard is effective for periods beginning on or after 1 January 2013, subject to EU endorsement. The Directors are assessing the possible impact of this standard on the Group's Financial Statements.
Amendments to IAS 1 "Presentation of Financial Statements" require items that may be reclassified to the profit or loss section of the income statement to be grouped together within other comprehensive income (OCI). The amendments also reaffirm existing requirements that items in OCI and profit or loss should be presented as either a single statement or two consecutive statements. These amendments are effective for periods beginning on or after 1 July 2012, subject to EU endorsement. The Directors are assessing the possible impact of these amendments on the Group's Financial Statements.
Amendments to IAS 19 "Employment Benefits" eliminate the option to defer the recognition of gains and losses, known as the "corridor method"; streamline the presentation of changes in assets and liabilities arising from defined benefit plans, including requiring remeasurements to be presented in other comprehensive income; and enhance the disclosure requirements for defined benefit plans, providing better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans. These amendments are effective for periods beginning on or after 1 January 2013, subject to EU endorsement, and are not expected to have an impact on the Group's Financial Statements.
Critical accounting estimates
The preparation of consolidated interim financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period. Significant items subject to such estimates are set out in the Group's 2010 Annual Report and Financial Statements. The nature and amounts of such estimates have not changed significantly during the interim period.
These interim results are unaudited and do not constitute statutory financial statements as defined in section 435 of the Companies Act 2006. The functional currency of the Group is US dollars and accordingly the amounts in the interim results are denominated in that currency. The balance sheet rates of exchange for the US dollar to UK Sterling was US$1.60641 to: £1.
The statutory financial statements for Kryso Resources plc for the year ended 31 December 2010 received an unqualified Auditors Report.
Basis of Consolidation
The consolidated interim results incorporate the interim results of the Company and all Group undertakings. These are adjusted, where appropriate, to conform to Group accounting policies. Subsidiaries are all entities over which the Group has power to govern the financial and operating policies accompanying a shareholding of more than one half of the voting rights. All significant intercompany transactions and balances between group undertakings are eliminated on consolidation.
Intangible assets - Exploration and Evaluation Expenditure
Research and exploration expenditure is written off in the year in which it is incurred. When a decision is taken that a mining property becomes viable for commercial production, all further pre-production expenditure is capitalised. Expenditure included in the initial measurement of exploration and evaluation assets and which are classified as intangible assets relate to the acquisition of rights to undertake topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and other activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource. Capitalisation of pre-production expenditure ceases when the mining property is capable of commercial production.
Exploration and evaluation assets are assessed for impairment annually or when facts and circumstances suggest that the carrying amount of any asset may exceed its recoverable amount. The assessment is carried out by allocating exploration and evaluation assets to cash generating units which are based on geographical areas. Where exploration for and evaluation of mineral resources in cash generating units does not lead to the discovery of commercially viable quantities of mineral resources and the Group has decided to discontinue such activities at the unit, the associated expenditure will be written off in the Statement of Comprehensive Income.
2. Operating Loss
| Operating loss is stated after charging/(crediting): | Audited | ||||||
| Unaudited | Unaudited | Year ended | |||||
| Six months to | Six months to | 31-Dec | |||||
| 30-Jun-11 | 30-Jun-10 | 2010 | |||||
| US$'000 | US$'000 | US$'000 | |||||
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| Depreciation | 15 | 57 | 74 | ||||
| Less transfer to exploration costs | (12) | (53) | (68) | ||||
| Operating lease rentals - other | 18 | 20 | 41 | ||||
| (Gain)/loss on foreign exchange | (460) | 44 | 193 |
3. Loss per Share
| Loss attributable to equity | |||||||
| holders of the Company (US$'000) | 447 | 718 | 1,117 | ||||
| Weighted average number of ordinary shares in issue | 253,797,339 | 159,691,568 | 172,566,797 |
The loss per share is calculated by dividing the loss for the period after tax attributable to equity holders by the weighted average number of ordinary shares in issue during the period. There is no difference between the diluted loss per share and the loss per share shown.
About the Pakrut Gold Project
The Pakrut gold project, of which Kryso has 100% ownership, is situated in Tajikistan approximately 112 km northeast of the capital city Dushanbe. Pakrut has total JORC Code-compliant Mineral Resources of 3,578,000 oz Au (assuming a cut-off grade of 0.0g/t Au) and is located within the Tien Shan gold belt, which extends from Uzbekistan into Tajikistan, Kyrgyzstan and western China and which hosts numerous multi-million ounce gold deposits.
Drilling at Pakrut has previously returned numerous exciting intersections, including the following results released in April 2011:
- Ore Zone 1: 21m (\* TW-15.3m) at 7.28 g/t, 24m (TW-17.98m) at 5.39 g/t and
16.5m (TW-12.36m) at 5.57 g/t Au
- Ore Zone 2: 30m (TW-22.62m) at 4.37 g/t and 42.9m (TW-32.89m)at 2.57 g/t Au
- Ore Zone 3: 16.5m (TW-13.28m) at 4.48 g/t and 6m (TW-4.92m) at 6.58 g/t Au
- Ore Zone 6: 4.5m (TW-3.44m) at 18.2 g/t
About Tajikistan
Tajikistan is a secular republic located in Central Asia. The country is a member of the Commonwealth of Independent States (CIS) and the Shanghai Cooperation Organisation. Tajikistan hosts numerous operating precious metal mines as well as the largest aluminium smelter in Central Asia. Kryso's management team has extensive experience in the mining industry in Tajikistan.
Copyright Business Wire 2011